The manager of a small health clinic would like to use exponential smoothing to

Question

The manager of a small health clinic would like to use exponential smoothing to forecast demand for laboratory services in the facility. However, she is not sure whether to use a high or low value of. To make her decision, she would like to compare the forecast accuracy of a high and low on historical data. She has decided to use an =0.7 for the high value and =0.1 for the low value. Given the following historical data, which do you think would be better to use? (Round answers to 2 decimal place, e.g. 15.25)

Using

provides a better historical fit based on the MAD criterion.

Week Demand
(lab requirements) 1 349 2 368 3 319 4 388 5 387 6 334

Explanation / Answer

The calculation table for both alpha = 0,1 and alpha = 0.7 is given below

For =0.1 ; yt = 0.1 yt + 0.9 Ft

Mean Absolute Deviation = 147.72/5 = 29.544

FOr alpha  =0.7

yt = 0.7 yt + 0.3 Ft

Mean Absolute Deviation = 182.37/5 = 36.474

so Alpha = 0.1 provides much better historical fit on the MAD criterion.

Demand(lab requirements)y Forcast(F) ABS(y-F) 1 349 #N/A 2 368 349 19.00 3 319 350.9 31.90 4 388 347.71 40.29 5 387 351.739 35.26 6 334 355.2651 21.27 353.1386 147.72 Forecast Sum

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